Introduction

  • Neelkanth School and Neelkanth residency is a twin project. In this the Neelkanth School will manage and operate a CBSE school, while Neelkanth Residency will offer sale of plots near the school. This twin project can be of a great benefit to the investors. The following section will discuss and describes the benefit to the single investors of different types and investing in residential plots with different angle. The single investor may be investing from different point of view. Say he might be investing for the purpose of return, building of future house, sale of existing house and shifting in long run to new house, etc.

A single investor

    • A single investor mayplan to operate their commercial activity from a large spaced residential-cum-commercial area and can benefit from a good infrastructure nearby. The group of such beneficiary are teachers, doctors, chartered engineers and accountants, costing and works accountants, lawyers, etc.
    • A single investor may offer services and while providing this services he needs occasional contact of his clients or industry, while most of his back office work he can carry out at a distant location far from the market. The group of such beneficiary are software consultant and programmers, energy audit firms, industry dealing in automation and electronic parts and services, etc.
    • A single investor who is dealing with government organization and the nearness of his workplace to international airport, or good connectivity by road and through Metro train may help them in the business a lot. They include event management people, actors and celebrity belongs to different fields.
    • A single investor who is dealing in financial activity and wants to have business activity near to Gujarat International Finance Tech-City (GIFT city) located at Ahmedabad (145 kM away from Dholera), this includes people dealing in international financing services, stock broking agents and related service people, people perform outsourcing work for overseas companies, etc.
    • A single investor who want to plan a retired house away from existing city (e.g. Mumbai) so that at a letter date when he will retire he can shift to new facility, leaving a costly property of existing city for their children to stay and benefit. He also can have good connect with them by paying occasional visits.

  • In each of the above cases the residents or buyers of plot will help populate the nearby area of school and can get additional benefit with the facility of school. These benefits to the residents of the Neelkanth residency are as under:

    • Residents of Neelkanth Residency will not only have facility of a CBSE School nearby, but they can also take part in the management of the school and can take admission for one of their kids without paying any donation fees.
    • Residents of Neelkanth Residency can use the facility of Neelkanth School like garden and joggers park between 4 PM to 10 PM every day. This facility will be kept opened for the residents of Neelkanth Residency every day for the said duration.
    • Residents of Neelkanth Residency can use common lecture hall and social gathering hall facility of the Neelkanth School at a nominal rate.
    • The school going kids (attending any school) of the Neelkanth Residency can attend the sports training and sports camps facility (or any other training camp) organized by Neelkanth School on Saturday and Sunday or in vacation at a nominal charge.
    • The school going kids (attending any school) of the Neelkanth Residency can attend the lecture series and other skill development courses offered by Neelkanth School from time to time at a nominal charge.

Investment Options

  • Investors in the Neelkanth Residency can be of three possible classes.

    • First type of investor will be investor investing based on its own capacity, individual investors.
    • The second type of investors will be motivated to invest by a known agency. The agency might be associated with investor in his capacity of his membership of a corporate group, social organization, NRI association or any religious organization. The agents or associate will introduce the project to its members and member in turn chooses to join project.

Individual investors

  • The investment scenario of the individual investors that invest in the buying of the plots in Neelkanth Residency has following different possible options:

    • Investor do not want to buy any plots instead he wants to invest in Bank for 20 years and later on he thinks he may buy a home with that accrued money. This type of investor thinks that purchase of residence is a short term activity, and he can buy residence at any point of time.
    • Investor want to buy a single residence plot by taking loan from the bank and later on he plans that he can go for the development of the plot by taking or by not taking another loan from the bank for the development of plot at his own choosing of time.
    • Investor can buy two plots simultaneously at today’s price by taking loan from the bank and later on he plans to sale one of the plots and can invest the resulting amount for the development of the remaining plot for the purpose of residence at the time of his own choosing.
    • Investor can choose to go for installment offer that is provided by Neelkanth Residency.

  • To compare the benefit of investing in plots and understand its financial implication under different options let us consider four persons investing in the project under different options.

    • Person A is not investing in project and he thinks that the need of residence is not a critical for him and instead he prefers to invest in Fixed Deposits in a bank. Like many persons, person A also think that residence can be purchased at any point of time and therefore that is not a critical issue that needs so much attention and required planning.
    • Person B thinks that the need of residence will be critical for him in near future, and he is investing in the project by taking loan from the bank and purchases a residence.
    • There is a third investor, person C, who is wise and he thinks that he is interested in buying the residence but wants to buy at a lower cost of purchase. Therefore, he plans to invest by purchasing two plots.
    • Finally, there is an investor, person D, who wishes to buy plots but do not have any source of funding, or facility to take loan from bank.

  • Let us consider following assumptions for different investment options of person, A, B, C and D:

    • The net cost of a 200-yard plot in year 2017 is Rs. 10 lacks, including everything.
    • Interest rate charged and offered by bank on loan and on FD are 11% and 7% respectively. The duration of the both the investments are 20 years. Each monthly installment is of Rs. 0.23 lacks.
    • Inflation considered during this period of the analysis is 7.5%.
    • General appreciation in the price of the plot for the duration of 10 years’ time is 3 times.

Investment for Person A

  • Investing in bank @ Rs. 23,000 (or Rs. 0.23 lacks) per month will make deposit of Rs. 2.8 lacks every year and yearly interest accumulation @ 7% will be Rs. 0.20 lacks in first year. The cumulative deposits of Rs. 0.23 lacks per month till 20 years along with income from interest will add up to Rs. 55.8 lacks. The present value of these investments and interest earned (considering inflation @ 7.5%) will be Rs. 42.7 lacks in the base year. That means for person A, investing @ Rs. 0.23 lacks per month for 20 years can generate a present value of investment equivalent to Rs. 42.7 lacks in the first year of investment.

Investment for Person B

  • Unlike person A, person B considers purchase of residence would be a critical need for him in coming years. For this he considers taking loan from bank amounting to Rs. 20 lacks and plans to purchase a residence in this amount in year 2017. He is repaying this loan to the bank by paying through the installment of Rs. 0.23 lacks per month. This will be able to make payment of Rs. 2.8 lacks every year to the bank. Bank will deduct the interest against the unpaid loan amount first and the remaining amount will be considered as a payment towards the remaining borrowed capital. Considering this, interest against loan will be Rs. 2.2 lacks in the first year (out of Rs. 2.8 lacks paid to the bank) and rest will be paid towards borrowed capital. The borrowed capital therefore will be reduced each successive year and hence the interest on the borrowed capital. At the end of 20th year the interest payable on the loan will be zero and paid-up capital against loan will be 100%. The cumulative deposits of Rs. 0.23 lacks per month against the loan till 20 years along with interest will add up to Rs. 44.7 lacks at the end of 20th year. The present value of these payments and interest on the loan will be Rs. 39.69 lacks in the base year. That means person B if paying loan @ Rs. 0.23 lacks per month for 20 years, can get a residence worth of 20 lack in the first year of investment and the net present worth of the payment will be Rs. 39.69 lacks. That means he pays 19.69 lacks as interest.

Investment for Person C

  • Person C also considers taking loan from bank of Rs. 20 lacks in year 2017. He is repaying loan to the bank in the installment of Rs. 0.23 lacks per month, this will make payment of Rs. 2.8 lacks every year to the bank, exactly in the same way as that of person B, but instead of purchasing a residence using this amount, he purchases two plots in Neelkanth Residency. His loan repayment schedule will be exactly same as the person B. He will be paying Rs. 2.8 lacks every year to the bank. Bank will deduct the interest against the unpaid loan amount first and the remaining amount will be considered as a payment towards the remaining borrowed capital. Considering this interest against loan will be Rs. 2.2 lacks in the first year (out of Rs. 2.8 lacks paid to the bank) and rest will be paid towards borrowed capital. The borrowed capital therefore will be reduced each successive year and hence the interest on the borrowed capital. At the end of 20th year the interest payable on the loan will be zero and paid-up capital against loan will be 100%. The cumulative deposits of Rs. 0.23 lacks per month against the loan till 20 years along with interest will add up to Rs. 44.7 lacks at the end of 20th year. However, as a change person C will sale one of his plots after a period of 10 years at a price of Rs. 27.92 lacks. This money he will invest in developing remaining plot in a span of 5 years at the rate of Rs. 6 lacks per year. This investment in the residence from 11th to 15th year will give him net present worth of around Rs. 11.78 lacks in first year of operation. The net present worth of loan in first year will be Rs. 39.69 lacks. The net present worth of loan will be reduced by Rs. 11.78 lacks and the resulting net present worth for the loan payment will come down to Rs. 27.92 lacks only. Therefore, under this option person C will take the loan from bank worth Rs. 20 lacks for 20 years and the cost of the loan will be only Rs. 27.92 lacks and in return he will get a well furnished residence of 200 yards.

Investment for Person D

  • There are certain investors who wish to invest in the plot but either do not have own funding or do not want to take loan from bank. For these types of investors Neelkanth Residency offers its own installment scheme. Under this a purchaser will be asked to deposit a fixed amount of Rs. 25,000 (0.25 lacks)per month in the account of Neelkanth Residency against purchase of plots for 30 consecutive months. On completion of 15 such installments or Rs. 3.75 lacks the person will be asked to go for the selection of plot in the Neelkanth Residency. At the end of depositing the entire amount equaling to the cost of land the investor will undergo the final purchase agreement with the Neelkanth Residency for the final purchase of selected plot. If a person fails to deposit regular installments or he wish to withdraw from this offer he will be returned the entire amount back, without interest, as per the same schedule as he paid, starting from the date of written confirmation of withdrawal letter to Neelkanth Residency.

  • Following Figure gives detailed calculations for the financial implication of different investment options.

  • Single Investor


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